THEBUSINESSBYTES
BUREAU
NEW
DELHI, OCTOBER 15, 2026
India’s inflationary
pressures are set to intensify, with wholesale inflation likely to cross 12 per
cent and retail inflation breach the 6 per cent mark in October, as adverse
base effects, weather-related disruptions and an energy price shock threaten to
push up prices, India Ratings and Research (Ind-Ra) said on Thursday.
The ratings agency
warned that the adverse base effect could keep wholesale price pressures
elevated at least until February 2027, with wholesale price index (WPI)-based
inflation expected to remain in double digits. The outlook, however, could
improve if the ongoing crisis in West Asia is resolved, it said.
“Wholesale inflation might jump to over 12%
and retail inflation breach 6 per cent in October 2026. However, in case the
West Asia crisis resolves, inflation could be lower,” Ind-Ra Chief Economist
Devendra Kumar Pant said. He added that the Reserve Bank of India (RBI) could
raise policy rates by another 50–75 basis points in the current tightening
cycle.
The warning comes
amid a sharp acceleration in price pressures in September. WPI inflation surged
to a series high of 11.39 per cent, from 9.92 per cent in August, while retail
inflation climbed to a 23-month high of 5.54 per cent, compared with 4.83 per
cent in the previous month.
Wholesale prices have
responded swiftly to the surge in energy costs, particularly petroleum
products, while the transmission of global price movements to retail inflation
has been more gradual, Ind-Ra noted. Retail prices are influenced by government
intervention through changes in taxes and duties, as well as adjustments in domestic
fuel prices, which have not kept pace with movements in global crude oil and
petroleum product prices.
A weakening rupee has
further amplified inflationary pressures by raising the domestic cost of
imported commodities and energy, adding to the burden on the economy.
“Both wholesale and retail inflation are
getting generalised,” Pant said, pointing to the widening nature of price
pressures and the possibility of further monetary tightening.
The distinction
between wholesale and retail inflation is significant. While changes in global
energy prices tend to affect wholesale prices almost immediately, their impact
on consumer prices depends partly on how much of the increase is passed on to
households and businesses. A prolonged energy shock, coupled with adverse base
effects and weather-related disruptions, could therefore sustain pressure
across the price chain.
The inflation outlook
poses a fresh challenge for the RBI as it seeks to contain rising prices
without unduly weighing on economic activity. Last week, the Monetary Policy
Committee raised the benchmark policy rate by 25 basis points to 5.50 per cent,
marking the first rate increase since February 2023.
Ind-Ra’s assessment
that rates could rise by a further 50–75 basis points signals the possibility
of a more sustained tightening cycle if inflation remains broad-based and
entrenched.
A prolonged rise in
wholesale prices could eventually feed into consumer prices, increasing costs
for producers and households alike. Higher interest rates, meanwhile, could
raise borrowing costs for businesses and consumers, making the RBI’s policy
decisions increasingly consequential for investment, consumption and overall
economic momentum.
Much will depend on
the trajectory of the West Asia crisis, global energy prices and the extent to
which higher input costs are passed on to consumers. For now, Ind-Ra’s
projections point to an inflation outlook clouded by external shocks and
domestic price pressures, with the coming months likely to test the RBI’s
resolve to bring inflation under control.
